How Can the Center of Excellence
be Strategic
]
Presented by: Doug Shuptar, Principal, SAP Business Transformation Services
[ JUERGEN LINDNER
SAP POINT OF CONTACT
MEMBER SINCE: 1998
[ LINDA WILSON
ASUG INSTALLATION MEMBER
MEMBER SINCE: 1999
[ ATUL PATANKAR
ASUG INSTALLATION MEMBER
MEMBER SINCE: 2000
[ Speaker Bio – Doug Shuptar
Doug Shuptar is a Principal in SAP’s Business Transformation Services
practice.
Mr. Shuptar has over 20 years of experience in integrating financial, cost
accounting, and supply chain applications, including 18 years of SAP
implementation experience.
Doug’s SAP experience focuses on small/medium-sized manufacturers with
global operations. He has led several global process design initiatives, managed
12 full lifecycle implementations and conducted several CoE strategy and
design development projects.
Mr. Shuptar previously worked as a global divisional controller for a Tier 1
automotive supplier as well as an auditor for a regional public accounting firm.
Real Experience. Real Advantage.
[AGENDA
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Session Objectives
Understanding the Basic Issue
Addressing the Needs
Identify the Solution
Taking Action
Real Experience. Real Advantage.
[ Session Objectives
 Explain the reasoning for the emphasis on business value
 Provide specific actions your organization can take to generate
business value
 Discuss how other customers have tackled delivering value to the
business
Real Experience. Real Advantage.
[AGENDA
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Session Objectives
Understanding the Basic Issue
Addressing the Needs
Identify the Solution
Taking Action
Real Experience. Real Advantage.
[ Why Create a CoE?
The benefits that can accrue to the organization from implementing a CoE are:
 Improve Total Cost of Ownership
 Lower cost per concurrent user by 13%
 Lower cost per Support FTE per concurrent user by 17%
 Lower infrastructure and application management costs through
process maturity in release, problem, and configuration management
 Improve Customer Satisfaction
 Increased participation from the business customer
 Enhance Business Value
 Ability to deliver more value to the business through:
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High availability and continuity of business processes
Fast and efficient user support
Fast and successful realization of new business requirements
Key Point: A Center of Expertise is the only proven method to achieve the right balance
of TCO, customer satisfaction, and business value
Real Experience. Real Advantage.
[ Are All Benefits Created Equal?
 Customer Satisfaction
 Baseline Benefit – This needs to be in place, regardless
 Total Cost of Ownership
 Impact to the bottom line of the business through cost savings
 Promotes a tactical view of the Center of Excellence
 Continues to foster the view of IT as a Cost Center
 Goal for a Cost Center is to:
 Reduce cost
 Do more with less
 Enhance Business Value
 Add business value by delivering project that drive top-line growth / bottomline savings
 This is an avenue for IT to become a strategic partner with the business
customer
Focusing on enhancing business value increases the likelihood of the Center of Excellence
acting strategically
Real Experience. Real Advantage.
[ If Only It Were That Easy
 Focus on business value – who is going to argue with that?
 Motherhood
AND apple pie
 The problem is that while it is:
 Easy to define
 Easy to prescribe actions
 Incredibly hard to achieve
 But, just because it’s hard to do does not mean that it is not worth doing
 Where every dollar of capital is scrutinized, it is important to invest wisely
 Must ensure these monies are well spent
 Pace of business makes this activity more critical
Real Experience. Real Advantage.
[AGENDA
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Session Objectives
Understanding the Basic Issue
Addressing the Needs
Identify the Solution
Taking Action
Real Experience. Real Advantage.
the Needs
[ Addressing
Lack of Alignment
 Lack of alignment between the technology strategy and the overall corporate
strategy
 How does this show up?
 Technology projects that come out of nowhere and never seem to reach their potential
 ‘Application gallop’ – satellite applications implemented to fix a critical problem
 Point solutions that do not fit into the overall enterprise application strategy
 How might this be corrected?
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Make sure the CIO (CTO) has a full seat at the executive table
Provide the opportunity to participate in the corporate decision-making and strategizing
Strengthen the relationship between IT and Finance
Formalize the constructs between technology strategy and corporate strategy
 What can / should these actions accomplish?
 Companies report that increased alignment between IT and business occurred once IT’s role
in business planning and strategy increased
 A well-managed technology strategy aligned with corporate strategy increases the likelihood of
technological innovation that give the business a competitive advantage
The need for constant innovation, compounded by the high cost of IT, demands aligned strategies as
the cost of a mis-step is dramatic
Real Experience. Real Advantage.
the Needs
[ Addressing
Lack of Measurement
(1/2)
 Failure to measure business value
 How does this manifest itself?
 Most companies create a business case (complete with benefits) as part of the approval
process but rarely re-visit the business case after the project is implemented
 There is a pervasive perception that IT is an enormous cost center whose value to the bottom
line is:
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Unknowable
Unmeasureable
Therefore, suspect
 Another common argument focuses on the number of resources necessary to measure
business value and its difficult nature
 How might this be corrected?
 Use the business case to measure value once the program is implemented
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Establish the baseline before the project begins
Measure at regular intervals
 Develop a standard set of business metrics used across the enterprise to measure value
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Real Experience. Real Advantage.
Use Finance as the independent auditor of the results
the Needs
[ Addressing
Lack of Measurement
(2/2)
 What can / should these action accomplish?
 Focus the organization on value delivered (top-line growth) as well as
cost savings (bottom-line impact)
 Begin to quantify business value delivered and the shift in perception from
a cost center to a value center
Only when companies can calculate business value can they empower management to make fullyinformed decisions on IT investments
Real Experience. Real Advantage.
the Needs
[ Addressing
Inability to Speak the Language
(1/2)
 IT resources do not speak the language of the business
 How does this manifest itself?
 Typical method of gathering business requirements
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IT resources talk to the business and/or facilitate requirements workshops
Assemble the requirements
Present to the business for sign-off / approval
 How well do the requirements articulate what the business needs?
 How well does the project team genuinely understand what the business is trying to
accomplish?
 If the resources do not understand the business, the requirements are more likely to be
incorrect (at worst) or incomplete (at best)
 If the resources do not understand the drivers of business value, how can they be expected to
understand / define business value generated?
 How can this be corrected?
 Move key solution design and business relationship roles into the business organization
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Active participation in multiple aspects of the operations
Represents the next layer of aligning business and technology strategies
 Include business training as part of the formal development plan for IT resources
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Real Experience. Real Advantage.
Train resources in the deeper principles of the business processes
Resources must be able to speak to the business in business terms, not technology terms
the Needs
[ Addressing
Inability to Speak the Language
(2/2)
 Develop a strong partnership between Finance and IT
 Teach / educate resources the financial principles to all aspects of their
responsibilities
 What can / should these actions accomplish?
 IT resources begin to better understand the nature of the business issues
 Seeing it every day and talking with the people clarifies understanding
 IT resources speak the language of the business
 Business requirements are framed in a way that both the business AND IT
understand
 Strengthening the relationship between Finance begins to quantify results
that both the business and its stakeholders understand
 Close collaboration between IT and Finance is at the heart of the business / IT
alignment
Unless IT understands the business issues and key opportunities coming up, they will not be able to
strategically participate with the business
Real Experience. Real Advantage.
[AGENDA
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Session Objectives
Understanding the Basic Issue
Addressing the Needs
Developing the Solution
Taking Action
Real Experience. Real Advantage.
IT Strategy with Business Strategy
[ Align
What One Customer Did – A Case Study
 Company: Large Investment House
 IT organization was invisible to the rest of the organization
 Operated in a reactive manner (an ‘order taker’)
 What they did:
 Established the role of IT Client Relationship Manager (CRM) responsible for
key business areas in the firm
 Expectations of the role was as ‘co-CIO’ to help understand the areas where
the business was struggling and help devise solutions
 Established a governance committee comprised of CFO, CIO, and CAO to
oversee how the business spent money on IT.
 What happened:
 The CRMs helped IT to:
 Focus on what really mattered to the business (not what they thought mattered)
 Create an awareness of key upcoming business opportunities
 As they experienced success in the little things, they started to get more
involved in the departmental operations of the organization
Real Experience. Real Advantage.
IT Strategy with Business Strategy
[ Align
What One Customer Did – A Case Study
 Company: Manufacturer of Automotive Components
 IT had poor reputation of delivery
 Constantly trying to keep pace with the business projects
 What they did:
 Convened a representative group from each line of business to determine overall
initiative priorities
 Consisted of senior-level representatives plus IT leadership
 On a quarterly basis, this group reviewed open initiatives plus upcoming projects in
order to determine priorities according to business needs
 What happened:
 Business and IT clearly worked on the same priorities
 IT initiatives were increasingly focused on accomplishing business objectives
 But … IT was not truly at the planning / strategy level, therefore …
 IT never really got out of the shadow of being a tactical organization
 Continued to be a very efficient ‘order taker’
Key Point: Aligning IT with business takes time.- it cannot be done overnight. It takes about 1-3
years to change middle management culture from tactical to strategic
Real Experience. Real Advantage.
[
Define Business Value in Business Terms (and Measure It)
What One Customer Did – A Case Study
 Company: High-Tech Manufacturer
 Challenge was issued to the organization to devise a way to measure the impact of IT
investments on the company’s business results
 What they did:
 Established a common process and common set of measurements against which each
IT initiative must be measured
 Each project needed to answer the following questions:
 How does this project contribute to IT’s customer results or help address the customer’s
business needs of challenges?
 Does this project help justify investing on IT applications, infrastructure, and operations?
 How is the solution tied to IT’s organizational goals?
 Does the solution focus on value to IT?
 Is the solution new and innovative to the business customer?
 Business and IT agreed upon the definition of business value by developing 19 different
measurements of business value
 These are the measurements of business value in both business and shareholder terms
 Common definition and method to measure means the business is on the same page
Real Experience. Real Advantage.
[
Define Business Value in Business Terms (and Measure It)
What One Customer Did – A Case Study
 What they did (cont’d)
 Established a baseline measurement at the beginning of each project
 Measured again after the project was complete
 Examples:
Value Measurement
Definition
Value Measurement Equation
Days Inventory
Solutions that reduce the days of inventory, leading to value in finished goods,
work in progress, or raw material inventories
(Value of 1 day) * (days of inventory removed) *
15% (weighted cost of capital)
Materials Discount
Solutions that result in strategic advantages for the material purchasing process
that both the company and its suppliers can use
(Prior material pricing) – (current pricing)
Capital Hardware and Software
Avoidance
Avoiding purchases in hardware or software as a result of strategic decisions or
consolidations. Modifying methods or systems can reduce, avoid, or delay the
need for installing new hardware and software
Total cost of the hardware of software avoided
Risk Avoidance
Process, business continuity, and security controls that minimize costly errors
or double payments, or help ensure the company’s business runs constantly
without data or production loss. Some risk can impact the company’s ability to
operate as a public company, which would impact shareholder value.
(Value of risk) * (Probability of occurrence)
Optimize Existing Markets
Solutions focused on increasing or adding revenue or units shipped to a current
market share segment
(Increased Volume) * (Average Selling Price)
Employee Productivity
Gains in headcount efficiencies or effectiveness. Employees produce more
through these gains due to additional time-based inefficiencies
(number of employees affected) * (time) *
(average burden rate) * (50%)
Real Experience. Real Advantage.
[
Define Business Value in Business Terms (and Measure It)
What One Customer Did – A Case Study
 What happened:
 The IT organization has delivered more than $1 billion of value to the
business in each of the last three years
 By proving IT’s impact to the bottom line, the attitude toward the
value IT projects is changing
 Project owners are more willing and better equipped to document,
measure and prove the value of their project in terms the business
customer understand
Key Point: Common definition of value and commitment to measure impact after implementation
drives a focus on delivering business value.
Real Experience. Real Advantage.
the Language of the Business Customer
[ Speak
What One Customer Did – A Case Study
(1/2)
 Company: Consumer Products Company
 IT received projects ‘over the wall’ from the business customer
 Very little coordination as to what was important
 What they did:
 Created a ‘Business Relationship Manager’ role responsible for working with the
business customer to assist in solving business problems using technology
 Business Relationship Managers were identified by major business process
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Finance / Corporate Services
Manufacturing
Supply Chain (including Customer Service)
 Business Relationship Managers (BRM) possessed a deep knowledge of the SAP application
combined with a solid understanding of the business processes
 Business Relationship Managers were physically located in the business department
 Proximity fostered conversation and conceptual thinking to solve problems
 BRMs actively participated in the operations (department meetings, business reviews, etc.) of
the organization
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Real Experience. Real Advantage.
Gained a sense of the ‘Big Picture’ while providing a view of the capability of the technology
the Language of the Business Customer
[ Speak
What One Customer Did – A Case Study
(2/2)
 What happened:
 The IT organization became much more engaged with the business customer
 Increase in the business value of the projects as they were linked directly
with business issues
 Accuracy of the business requirements definition improved as IT understood
the business operations much better
 But …
 As projects funneled into a central organization, the portfolio management
processes needed to be improved to better prioritize business initiatives
 Particular attention needed to be given to the BRMs in order to ensure they did
not become disconnected to the IT organization
Key Point: Placing key IT roles – strategic application resources – in the business improves the
capability of IT to identify solutions with a business focus
Real Experience. Real Advantage.
[AGENDA
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Session Objectives
Understanding the Basic Issue
Addressing the Needs
Developing the Solution
Taking Action
Real Experience. Real Advantage.
[ Top Takeaways for the CoE to Think Strategically
 Align the technology strategy with the overall corporate strategy
 Provide the CIO with a full seat at the executive table to plan and strategize
 Clearly articulate the strategies so that all understand how they fit together
 Define business value in business terms
 Develop a strong partnership between Finance and IT
 Finance can help to drive the concept of business value
 Move IT into the business
 Move business relationship and key designers into the business departments
 Allow them to be active participants in the various department operations
Focus on continually delivering innovative solutions in order to sustain the competitive advantages
Real Experience. Real Advantage.
[ Top Three Things that Can Be Done Today
 Begin measuring business value generated once the program is complete
 Use the business case as the starting point
 Measure at regular intervals
 Capture the value; report the value; publicize the value
 Develop the business knowledge of your IT resources
 Train them in the principles of the business discipline and the deeper
principles of the processes
 Train the resources to speak in terms of the business
 Establish these objectives in a formal development plan
 Reciprocal learning (business learning IT concepts) should also be emphasized
 Develop a customer service approach with the IT resources
 Think customer first
 Get to know the customer, what is important to the customer, and why it is
important
Real Experience. Real Advantage.
[ Further Research
 ‘Beyond Strategic Information Systems: Towards an IS Capability’ – Joe Peppard, John Ward,
Journal of Strategic Information Systems, April 2004.
 ‘IT Moves from Cost Center to Business Contributor – The CFO’s View on Measuring IT Value’ –
CFO Research Services / PriceWaterhouseCoopers, Septermber 2004.
 ‘SAP Center of Excellence Primer’ – Patrick Rayes, blog.patrickrayes.com, April 15, 2010.
 ‘SAP ROI through Strategic Business Transformation’ – www.r3now.com, January 31, 2011.
 ‘Using an IT Business Value Program to Measure Benefits to the Enterprise’ – Matthew M. Carty
and Richard Lansford, Intel Corporation, June 2009.
 ‘CIO Challenge – IT / Business Alignment’ – Leslie Kramer,
www.wallstreetandtech.com/articles, September 23, 2005.
Real Experience. Real Advantage.
Q&A
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Real Experience. Real Advantage.
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Contact Information:
Douglas R. Shuptar
e-Mail: douglas.shuptar@sap.com
Phone: (630) 240-8219